2016 Analysis of Regulatory Violations & Consumer Complaints

With the news of mass customer exploitation by Wells Fargo, we evaluated consumer complaints and regulatory violations to see how the rest of the retail banks in the U.S. stack up.

Due to the nature of what they do, banks and financial institutions in the United States are held to high scrutiny. We analyzed data on tens of thousands of consumer complaints as well as settlements and financial penalties for America’s 50 largest retail banks by asset size. This allowed us to create a set of metrics for judging their relative trustworthiness and relationship with customers.

7. Synchrony

8. Discover

9. SunTrust

Consumer Complaints: 43/50

Regulatory Penalties: 43/50

Responsiveness: 12/50

10. Capital One

Consumer Complaints: 42/50

Regulatory Penalties: 33/50

Responsiveness: 15/50

The Full List of Banks

The table below shows all 50 financial institutions examined in this study, and their relative rank in the categories we looked at. Note that we grouped certain banks together, if they are owned by a single holding company. For example, Santander Holdings USA, Inc. owns both Santander Bank USA and Banco Santander Puerto Rico.

The Best (and Worst) in Each of the Categories

We take a closer look at the three main categories to see which banks ranked the highest and lowest in each. Generally, small community and regional banks performed better than national chains with one exception—responsiveness.

Consumer Complaints

The first group of metrics we looked at was customer complaints. The Consumer Financial Protection Bureau (CFPB) maintains a database of all the complaints they’ve received since 2013. These reflect problems users had with any financial product offered by these banks – anything from checking accounts to credit cards. These grievances are typically the result of a customer not receiving a satisfactory response from a bank. That is, they tried to talk to a customer service representative or banker, and were either ignored or unhappy with the result. The CFPB, a government regulatory agency, is typically the next stop for consumers in such a case.

Fewest Complaints

Rank

Bank

Complaints Per $100M in Assets

Total Complaints

1

Raymond James Bank

0.012

4

2

Frost Bank

0.14

42

3

East West Bank

0.22

71

4

Rabobank

0.26

66

5

E*Trade

0.32

157

Most Complaints

Rank

Bank

Complaints Per $100M in Assets

Total Complaints

1

Synchrony Bank

12.9

10,665

2

Barclays

10.8

3,216

3

Discover

6.1

5,365

4

Capital One

5.1

17,177

5

Santander

3.6

4,524

Regulatory Violations & Penalties

The next factor was regulatory penalties. We sourced data from Good Jobs First's Violation Tracker, which shows fines, settlements and other penalties paid by banks for issues like mortgage abuses, credit card violations and toxic securities. These serve as a good indicator of whether a bank engaged in practices the government deemed as illegal. For example, recently Wells Fargo received media attention after their bankers opened thousands of credit card and deposit accounts for customers without their authorization. As a result, the bank paid $185M in fines and was forced to refund money to affected customers.

Lowest Penalties

Rank

Bank

Total Assets

Number of Violations

1

BB&T Financial

$222M

None

2

BMO Harris

$132M

None

3

BBVA Compass

$92M

None

4

Comerica

$71M

None

5

CIT Bank

$67M

None

Highest Penalties Per Asset

Rank

Bank

Total Penalties

Penalties Per Asset

50

Barclays

$3,371M

114

49

Rabobank

$800M

32

48

Bank of America

$56,690M

26

47

HSBC

$4,034M

14

46

First Tennessee Bank

$332M

12

Responsiveness

The last metric was responsiveness. Problems and issues happen all the time, and it’s important to most consumers for their bank to respond in a timely manner. Once again, we turned to the CFPB database to analyze three key components of responsiveness – timeliness, response type, and consumer satisfaction. Larger banks had the edge in this category. They were more likely than smaller institutions to provide consumers with relief, such as a refund.

Most Responsive

Rank

Bank

% Disputed Resolutions

Responsiveness Score

1

Synchrony

15%

14

2

Barclays

18%

22

3

Ally Financial

17%

36

4

BOK Financial

16%

36

5

Citizens Bank

19%

40

Least Responsive

Rank

Bank

% Disputed Resolutions

Responsiveness Score

50

CIT Bank

24%

133

49

Whitney Bank

27%

132

48

E*Trade

25%

122

47

HSBC

23%

120

46

People's United Bank

23%

111

Most Complained About Banks by State

The complaint data from the CFPB allowed us to look at which institutions received the most issues per state. Keep in mind that, a lot of the time, this data may be skewed because of the massive presence of one of these companies in a given state. The complaints date back to December 2011, up through 2016.

State

Company with Most Complaints

Total Complaints

Percent of All Complaints

Alaska

Wells Fargo & Company

107

32%

Alabama

Wells Fargo & Company

440

18%

Arkansas

Bank of America

235

21%

Arizona

Bank of America

1,492

23%

California

Bank of America

11,429

26%

Colorado

Wells Fargo & Company

855

18%

Connecticut

Bank of America

809

20%

D.C.

Bank of America

363

20%

Delaware

Bank of America

260

15%

Florida

Bank of America

6,768

24%

Georgia

Bank of America

3,168

25%

Hawaii

Bank of America

262

26%

Iowa

Wells Fargo & Company

255

23%

Idaho

Wells Fargo & Company

183

20%

Illinois

JPMorgan Chase & Co.

1,810

17%

Indiana

JPMorgan Chase & Co.

453

15%

Kansas

Bank of America

289

22%

Kentucky

Bank of America

267

14%

Louisiana

JPMorgan Chase & Co.

447

20%

Massachusetts

Bank of America

1,640

24%

Maryland

Bank of America

2,179

22%

Maine

Bank of America

249

22%

Michigan

Bank of America

1,712

22%

Minnesota

Wells Fargo & Company

887

23%

Missouri

Bank of America

799

22%

Mississippi

Bank of America

183

17%

Montana

Wells Fargo & Company

106

24%

North Carolina

Bank of America

1,863

21%

North Dakota

Wells Fargo & Company

50

22%

Nebraska

Wells Fargo & Company

222

23%

New Hampshire

Bank of America

474

28%

New Jersey

Wells Fargo & Company

2,561

19%

New Mexico

Bank of America

255

21%

Nevada

Bank of America

765

24%

New York

JPMorgan Chase & Co.

4,033

17%

Ohio

JPMorgan Chase & Co.

1,119

12%

Oklahoma

Bank of America

269

17%

Oregon

Bank of America

769

22%

Pennsylvania

Wells Fargo & Company

1,734

16%

Rhode Island

Bank of America

210

20%

South Carolina

Bank of America

608

20%

South Dakota

Wells Fargo & Company

89

22%

Tennessee

Bank of America

779

19%

Texas

Bank of America

3,128

19%

Utah

Wells Fargo & Company

279

19%

Virginia

Bank of America

1,825

20%

Vermont

Bank of America

96

16%

Washington

Bank of America

1,442

24%

Wisconsin

Bank of America

507

15%

West Virginia

JPMorgan Chase & Co.

115

17%

Wyoming

Wells Fargo & Company

50

20%

Experts' Take

For additional context to the data, we sought out experts to answer questions on topics such as banking violations and consumer protections.

Philip Mattera is the Director of the Corporate Research Project of Good Jobs First

1. Have we seen an increase or decrease in banking violations over the last few years?
Over the past five years or so, there has been a tsunami of misconduct cases involving major banks. The cases with the biggest settlements and fines -- reaching billions of dollars for banks such as JPMorgan Chase and Bank of America -- involved the sale of toxic securities and mortgage abuses in the period leading up to the financial meltdown of 2008. The big banks have also paid billions to resolve cases concerning practices such as the manipulation of both interest rate benchmarks (especially LIBOR) and foreign exchange markets. We've also seen numerous cases involving credit card abuses and other consumer protection violations. The recently announced case against Wells Fargo for charging fees on accounts created without the customer's knowledge is the latest example.

2. Have there been any big changes to accountability or transparency within the U.S. banking system?
The big difference is that the Justice Department and some of the regulatory agencies are willing to impose much bigger penalties than in the past. Also new is the aggressive role of the Consumer Financial Protection Bureau, which in its five years of existence has brought a series of high-profile cases against both large and small financial violators. The unresolved question is whether these larger fines are having the intended deterrent effect or are regarded as a cost of doing business by financial institutions that go on breaking the rules.

3. How can people get involved with promoting greater transparency among banks?
Customers who have experienced mistreatment by financial institutions should be sure to file complaints with agencies such as the CFPB, which makes it easy to do so on its website at http://www.consumerfinance.gov/complaint/. The bureau takes these complaints seriously in its enforcement activities. It is also important for the public to express support for the CFPB and other financial regulatory agencies to push back against industry efforts to weaken oversight.

Andrea Luquetta-Kern is the Director of Policy and Research at the California Reinvestment Coalition

1. Do consumers have the right to pursue legal action against banks, if they believe they've been wronged? If not, what can they do?

It depends, but mostly, no. Banks have included forced arbitration clauses to prevent their customers from joining together to sue them. However, the good news is that the Consumer Financial Protection Bureau (CFPB) is proposing rules that will likely eliminate bank's ability to use arbitration clauses with their customers. For right now, we'd recommend reaching out directly to your bank to address this issue, if that fails, a CFPB complaint can help spur action. If you still need redress, you could contact an attorney to confirm whether or not you're bound by an arbitration clause, or if there's a way to still pursue legal action.

2. Do you have any general tips for consumers about how they can improve their chances of resolving a conflict or proving their case to the bank/regulator?

We recommend keeping detailed notes and copies of your statements or documents related to the problem, as well as a log of who you spoke to at the bank (or regulator agency) and what their response was. Social media can also be an effective way to catch the attention of a company.

In terms of regulators, the CFPB has earned a reputation of being one of the most responsive to consumers. Noting the $11 billion in consumer relief the CFPB had obtained in its first four years, Professor Adam Levitin from Georgetown Law School explained:

"These recoveries are even more remarkable given that they include a period of time when the CFPB was still ramping up its staffing and finding its sea legs, and do not include pending actions. In contrast, all of the federal bank regulators combined—the Federal Reserve, FDIC, OCC, OTS, and NCUA—plus the Federal Trade Commission achieved less than a billion in consumer relief over the decade prior to the operation of the CFPB despite these agencies having the very same power as the CFPB to prohibit unsafe and deceptive acts and practices."

3. What are some telltale signs that a consumer's bank is taking advantage of them or engaging in predatory practices?

You should be wary if your bank is trying to sell you something other than what you asked for. If you're interested in a product they're suggesting, do some research, comparison shop, and come back later. You should never respond to hard sales tactics, no matter how good they sound, on the phone or in person. We also recommend checking the CFPB complaint database to see what other customers have experienced. You can filter by company and by product, so for example, you could look up Wells Fargo and bank accounts.

Read your statements regularly, review your transactions, and check for unexpected fees. You can also ask your bank how much you've paid in fees each year. Last, obtain your credit report for free here: https://www.annualcreditreport.com/index.action You can also obtain reports from ChexSystems and Early Warning System.

Jim Angleton is the President of Aegis FinServ Corp

1. Do you think consumers who bank at small region and community banks have a better chance of avoiding predatory practices?
Good question. Community banks under $1.5B do not have the talent or manpower to offer diverse programs/products and rely on 3rd party vendors to provide such services under a private label scenario. Larger Community Banks above $1.5B have difficulty with organic growth. Therefore they have multiple departments and are self sufficient. However, they use different measurement tools plus cost center analysis. This can get them into trouble, like [Wells Fargo], by offering small base pay and incentivized structures above certain thresholds of income expectations. The answer is yes, but it is qualified by the size of the institutions. Lastly, Bank Examiners and Regulators have thinned out and they are overwhelmed when conducting routine examinations. When complaints are the reason for examination...they come in as if guns blazing and ready to kick-butt.

2. How about large institutions?
The bigger ones, to a certain point are very gamy. Regulators are cautious when writing up bigger banks and citing violations. They know once they issue their exit memorandum and citations for violation of regs, policy and procedures...they could be sued, challenged by official filing of complaint plus objection to findings. They actually are much harsher upon the smaller bank than the big ones.

Methodology

We examined the top 50 retail banks in the United States as measured by their assets. We excluded corporate banks from our listing. The banks were obtained using iBanknet.com. We then scored each bank according to three separate metrics, which we break down below.

Complaints: We looked at over 600,000 complaints dating back to December 2011. They were logged against a number of financial products, including mortgages, credit reporting and bank accounts and services. For example, some banks did not properly credit a mortgage payment, charging consumers a late fee. The CFPB would then track several additional factors – whether the company responded in a timely manner, what the bank’s response was, and whether the company responded in a timely manner.

Regulatory Violations & Penalties: This category allowed us to keep track of how effective banks are at sticking to laws and regulations – most of which are aimed at protecting consumer rights. In our overall ranking, we considered penalties per asset, to control for the size of the institutions. Regulatory are sometimes decided on by scope. Therefore, a large institution violating a law may get fined more because more consumers were affected.

Responsiveness: Finally, it was important to factor in the effectiveness of each institution’s responses to consumer issues. We looked at three factors for this metric: were the responses to complaints timely? Did the institution provide relief to the consumer (either through a refund or a non-monetary compensation)? Did the consumer dispute the bank’s response to the issue? Most institutions responded to complaints in a timely manner 97-99% of the time. Because of this, we put less weight on this factor than the other two.

Links to Sources:

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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